I have read several articles about how Bitcoin have an intrinsic value. Aside from the fact that some of those articles confuse "intrinsic value" with "benefits of adoption", I found that none of them could prove that Bitcoin is actually money and not a currency.

Take this example, if I take my Bitcoin from the US to Yemen, it would be the equivalent of taking absolutely nothing to Yemen. Why is that, you ask?

Because Yemen has no Bitcoin bank/supplier/merchants, no one cares about Bitcoin. Now, if I take Gold to anywhere on Earth, people will take that. In the case of Gold, the supply is limited but the demand is unlimited (everyone accepts it) for two reasons. One reason is that Gold is money in itself (if the country uses Gold standard, which I don't recall any that does), and two, is because even if Gold is not money in the country, it's still a commodity to be sold to get money!

So Gold indeed has a value just for being Gold! Bitcoin is a supply and demand currency, which Bitcoin.org clearly states ("The price of a bitcoin is determined by supply and demand"), yet they also say "Much of the trust in Bitcoin comes from the fact that it requires no trust at all", that's illogical as it's dependent on the demand of people which varies by location, i.e. you need to trust that that place has a Bitcoin bank!

If people of that country don't have Bitcoin bank, then that immediately means that Bitcoin value is almost 0 in that country. If Bitcoin's value is zero, no bank would want to spend money to build a branch there. So it's more like fiat currency!

I wouldn't go very far with a Dollar in the country that doesn't have its currency tied to Dollar (even though I don't recall any that doesn't, except the Islamic State, which recently announced Gold and Silver money). This proves several things, that Bitcoin is a currency, that it's dependent on the demand (specifically the location of the market), and thus, that, very much, takes the "universality" it's so much praised for when people talk about how you can make international transfers so easily. You really can; but the problem is that you probably wouldn't do so to most countries that actually need that capability; due to the nature of those countries and the lack of a Bitcoin bank. The only reason why one might want to get Bitcoin in countries where no Bitcoin bank exists, is to buy stuff online. But then again, this has never been the main problem. Credit Cards have solved this for a long time.

So I guess the question is, does Bitcoin have an intrinsic value (is it money) or does Bitcoin have "location value"/trust value (is it a currency)?

Trust in the context of bitcoin usually has to do with security in that you don't need to trust anyone with your money. You don't have to trust a bank or Western Union and such. The trust in your context is about whether there's enough supply and demand to be able to trade your bitcoins for goods or services or other currency. That of course is location dependant. It also started out as a chicken and egg problem but that is quickly being overcome by the rapid growth. The network effect is huge, but the world is still a big place so it takes a bit of time.
– JannesNov 26 '14 at 13:44

5 Answers
5

It is of limited quantity. Bitcoin also has a limit to the total
amount in circulation, and so has an element of digital scarcity
built into its design to mimic physical scarcity.

You can't counterfeit it. (Actually you can create gold, it just costs way more than just buying it) Bitcoin can't be copied through
any known process. You can't transmute lead to gold, nor simply
convert a random collection of bits into Bitcoin.

People accept it for Barter You can use Bitcoin with merchants all over the world, as well as person to person payments. The number
of people accepting and transacting in Bitcoin is growing every day.

You can build physical products with it While not a direct correlation the Bitcoin network is a highly secure trust network.
Nothing like it has existed before on its scale, and it seems clear
that quite a bit can be built on top of it. That gives the network
real value for companies emerging in various new sectors, and how do
you get access to this network? Bitcoin.

If people believe it has value, trade in it, and it lets you do things that were previously impossible it seems like it has intrinsic value by any definition.

This is an interesting answer. I'm still in dilemma about whether it's money or currency though (this has huge consequences, that's why I'm mostly stressing this point). But this is interesting in the sense that Gold has acquired its value from its historic use (as well as the other qualities of it). So the supply is limited, while the demand is dependent on people's acceptance, which has grown through time. Bitcoin may acquire the same degree of acceptance through time, especially where it's meant to be used, the Internet. I'm fluctuating in my Bitcoin stand just as much as the Bitcoin price.
– MarsNov 27 '14 at 14:44

If Yemen would not have any gold suppliers/merchants, gold would also have no value, other than being a paper weight. Only because you 'trust' someone else will accept gold as a form of payment, gold has value for you.

...if I take my Bitcoin from the US to Yemen...

The bitcoins would still be worth the same amount of USD as they would in the USA, since Bitcoin is a digital commodity. (You cannot move it.) Using / sending / accepting bitcoin is not limited to any country (or planet...) so you could still trade your bitcoin for fiat currency in Yemen.

(As long as you have an internet connection...)

Edit: If you directly want to buy something in a store in Yemen, you'll have to look for a store owner that accepts bitcoins. The human factor is the limiting factor here, not bitcoin as a protocol / way of sending value from one place to another.

No one cares about Bitcoin.

Just because a large group of people does not care about it, does not make all of 'us' not care about it. You obviously care enough to ask this question.

Now, if I take Gold to anywhere on Earth, people will take that.

How is this any different than bitcoin? It does not matter where on earth you are, right now and in the foreseeable future there will still be people accepting your bitcoins.

if the country uses Gold reserves, which I don't recall any that does

The Netherlands (De Nederlandsche Bank / DNB) still do. You can't actually walk into the bank and ask for a ten euro note to be exchanged for a portion of gold. (The DNB bank is actually only a bank for banks.) So it is not exchangeable in that way. A bank however does need to have 'proof' of insolvency, so that's why they still carry gold. Most Dutch consumer banks (ABN Amro / ING / RABO Bank) don't actually hold gold anymore, they now have a database in some basement that says they are worth an x amount of money. They exchange money with the DNB and all of this is done digitally, so the gold is pretty much out of use nowadays.

So Gold indeed has a value just for being Gold! Bitcoin is a supply and demand currency

Gold has value, just because it has value? Wrong. It is a supply and demand product. It also has a value that fluctuates up and down. Yes, bitcoin has a supply and demand. Today it might be worth more than it will tomorrow, but gold and bitcoin have the same amount of value for just being gold and bitcoin.

So I guess the question is, does Bitcoin have an intrinsic value (is it money) or does Bitcoin have "location value"/trust value (is it a currency)?

It is not money, it is like gold, except you can't actually touch it.
It is not a currency in most countries, since most countries state that a currency is only a currency, when it is backed by the government of that country. (In the Netherlands, being a currency also means a merchant cannot decline this form of payment. I do not possess enough knowledge of other countries to imply knowing how it works there.)

I don't want to make this a debate. Though all of what you said is contested by what I wrote. I suggest you read it again. About the "no cares about Bitcoin", I meant in Yemen (and places where Bitcoin can't be cashed out nor can be used in its current form to buy goods). I obviously care (very much) about Bitcoin, and I know millions do. So yeah, not to make this a debate, thanks for the answer. Although it doesn't answer whether it's money or currency. You haven't provided objective evidence but subjective ones. (Also, thanks for the Netherlands info)
– MarsNov 26 '14 at 13:46

A lot of countries still hold gold in their vaults. But a lot (most? all?) don't directly back their fiat money with it. I don't think you can walk into the Dutch central bank and exchange your euros for gold (as used to be theoretically possible in the old days).
– JannesNov 26 '14 at 13:49

@mars Of course it's supply and demand, just like with gold, as mr Jones said. One has been in use for thousands of years, the other only a few. Also don't get hung up on the word intrinsic as that means nothing. Nothing has intrinsic value. A bottle of water floating in space is worthless to a thirsty guy in the middle of the desert. Value of anything is what people are willing to do or exchange for it. And that is always location, time, mood and weather dependant. Although you can argue that bitcoin makes at least one side of any exchange location INdependant as it's not physical.
– JannesNov 26 '14 at 14:08

1

@Mars, not trying to create a debate, just trying to clarify the 'difference' (or lack thereof) between gold and bitcoin. We are all just sheep, mindlessly seeing gold as something valuable, when in fact it is no different than bitcoin.
– Mr JonesNov 26 '14 at 14:29

Take this example, if I take my Bitcoin from the US to Yemen, it would be the equivalent of taking absolutely nothing to Yemen.

You don't need a "bitcoin bank" to exchange Bitcoins with the local currency. You just need to find one guy who is willing to buy the Bitcoins from you in exchange for the local currency. I'm sure there is at least one guy in all of Yemen who knows what Bitcoin is and would be willing to trade with you. If you can , you just turned "nothing" into however much a Bitcoin is worth in Yemeni rial.

No. You can't eat Bitcoin. Bitcoin has advantages over other forms of barter, but that doesn't give it intrinsic value.

So Gold indeed has a value just for being Gold!

I agree. Gold has uses besides as a medium of trade. However, the market value of gold is far higher than its intrinsic value. If I had to guess, I'd say that gold's intrinsic value is about $100 per kilogram.

If people of that country don't have Bitcoin bank, then that immediately means that Bitcoin value is almost 0 in that country. If Bitcoin's value is zero, no bank would want to spend money to build a branch there.

Bitcoin didn't have any value immediately after it was created. Yet, there are still companies that exchange Bitcoins for other currencies. So, there's something wrong with this argument.

is because even if Gold is not money in the country, it's still a commodity to be sold to get money!

So, you're saying that online-banking or PayPal balances are not money either, right? The definition is usually along the lines of "Any item or verifiable record that fulfills the functions of medium of exchange, unit of account, and store of value can be considered as money." We can argue about those properties, but I don't think that tangibility is actually a criteria for money.
– Murch♦Jan 10 '17 at 13:15